14:39 | 27/02/2020 Finance - Banking
(VEN) - Despite the fluctuations of the stock markets in the region due to the effects of the Coronavirus (Covid-19), the Vietnamese stock market continues to attract foreign capital.
Attracting foreign capital
According to statistics compiled by the KIS Vietnam Securities Corporation (KIS), the last week of January 2020 saw strong capital outflows from Southeast Asia with about US$102 million, the highest in the last eight months. Specifically, capital flows were strongly withdrawn from Thailand and Malaysia with US$51 million and US$35 million, respectively. The Philippines and Singapore were also affected by capital outflows.
Contrary to the capital withdrawal trend in regional markets, the Vietnamese stock market continued to attract foreign capital. In the first week of February 2020, it attracted about US$4.1 million, mainly from VFMVN30 ETF with US$3.4 million and VanEck Vietnam ETF. In particular, from January 20 to 31, foreign investors’ net buying activities recorded a net buying value of VND491 billion. Stocks in the fields such as consumer goods, raw materials and finance-banking were the top three purchased.
According to the State Securities Commission of Vietnam (SSC), the outbreak of Covid-19 has resulted in a decline in the February trading sessions. Nonetheless, Vietnam’s improved policies and business environment and its macroeconomic stability, as well as the intrinsic strength of the domestic stock market, have engaged the interest of foreign investors.
The Vietnamese stock market will lure more foreign capital in 2020, supported by many factors, especially exchange-traded funds (ETFs). It will continue to attract cash from its two key investors - Thailand and the Republic of Korea, because of the interest rates in these two countries following last year’s central bank rate cuts.
The Ho Chi Minh City Stock Exchange introduced three new stock indices, including VNDiamond, VNFin Select, and VNFin Lead, based on the investment requirements of local funds, to meet the market’s diverse needs. In addition, SSIAM, VFM, VinaCapital and some other fund management companies have plans to launch ETFs based on new indices.
Le Quang Minh, head analyst of Mirae Asset Securities, said there will be differences in foreign capital flows, including capital flowing into stocks and bonds. As raising capital via stocks will be more difficult, large businesses wishing to mobilize US$200-300 million or banks must consider raising capital via bonds.
A more positive forecast for the Vietnamese stock market also stems from expectations of its upgrade from frontier market status to emerging market status by Morgan Stanley Capital International (MSCI).
In particular, if divestments and equitization advance, the Vietnamese stock market can attract more capital from foreign investors.